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What are the challenges that mid-size companies face as they look to grow? What types of decisions do they typically have to make? What keeps the company leadership / decision makers up at night?
Hello! Thanks for your question about the challenges that mid-size companies face as they look to grow. The most useful sources I found to answer your question were research sponsored by the likes of SAP and Oracle.
The short version is that mid-Size company leaders face challenges in three distinct areas; technology, HR/staffing and finance. These challenges differ from smaller companies because such companies do not deal as strongly with the need for growth.
Below you will find a deep dive of my findings.
Methodology
My colleague and I researched academic databases, industry reports, and trusted media sites. After finding the various challenges that mid-size companies face, we selected the recurring ones and focused primarily on them. The three challenges we found were technology, HR/staffing and financial challenges.
For each challenge, we included quantitative data as well as qualitative data for insight and backing for our findings.
We also looked at why these challenges were specific to mid-size companies and not smaller companies as well.
Challenges Faced by Mid-size businesses
In a report from the Economist Intelligence Unit, sponsored by SAP, we found some qualitative data which outlined the biggest challenges that mid-size companies face. We used these findings to discover the biggest difficulties that mid-size companies face as they look to grow.
Downward pressure on prices,
Rising cost of raw materials and services,
Market saturation,
Shortage of talented staff,
Consolidation among competitors
Alternatively, in the same report, the attributes that are most likely to erode as a company expands in size are;
Ability to execute changes in strategy quickly,
Deep customer relationships,
Pricing flexibility,
High quality of products/services,
Low cost of inputs and/or operations
Also, in another report by Ernst & Young titled "Managing complexity and change in a new landscape," the top challenges for investment operations for mid-size companies are;
The need for compliance with regulatory requirements,
Cost pressure,
Investment product innovations,
Technology innovations,
Resource skills/talent management,
From this vast array of challenges that mid-size comanies face we can extract some common hardships which business leaders of mid-size companies may face.
Evidently, staff and talent management becomes more difficult as a firm grows and costs become more complex as they are incurred on a larger scale. Technology is also a common feature among the many challenges that these companies face. We will thus look deeper into these three areas below.
Technology
Mid-size firms are in a complex situation, their rival firms are continually trying to 'squash' them whilst customers exert their increased power upon them. Research sponsored by Oracle, stated that "To respond effectively, mid-sized firms must work smarter, using their people and technology to maximum effect".
In the same report, survey respondents ranked the top constraints on growth with regard to technology at mid-size firms, these included;
Software applications costs,
IT staff skills and costs,
The resistance of employees to new technology,
The availability of IT skilled staff,
The effectiveness of software applications
IT security is also one of the biggest challenges for Midsize firms. An Osterman Research Survey Report concluded that "71% of SMBs reported suffering a security breach during the previous 12 months, with companies with fewer than 500 employees proving the most vulnerable with a 75% breach rate."
This data affirms that handling technology is one of the main challenges that mid-size business owners face.
HR/Staff Related Challenges
In a survey from global staffing firm Robert Half, aimed at finding the specific challenges that mid-size companies face, concluded that 65% of the companies surveyed cited problems with their hiring process. 49% stated that hiring managers underestimate the complexity of the process whilst 81% affirmed that they have made a bad hire.
On the same, as firms grow operational issues arise that are likely to be a function of the degree of HR-IT integration and HR outsourcing that occurs. As HR practices become more complex, more skills and expertise are needed. This is why HR/staffing issues are not as pronounced in smaller companies.
The growth of a firm makes the hiring and HR process more difficult. This is an apparent challenge that mid-size company leaders face.
Financial Challenges
A survey by American Express Business Growth Pulse in 2016, outlines some interesting statistics regarding the financial challenges of mid-size firms;
- Over the last quarter, half of middle market companies (46%) say they experienced a cash flow crunch.
Financing decision-making also proves to be a challenge as 61% of mid-size firms affirm that they struggle to ensure their data is protected against security breaches.
On the other hand, in the case of small businesses, cash flow concerns are more likely to be related to day-to-day management rather than plans for growth. And only 27% of small businesses say they experienced a cash flow crunch over the last quarter whilst 25% of small businesses stated that collecting accounts receivable is their biggest cash flow worry come the following year.
Conclusion
To wrap it up, mid-Size company leaders face challenges in three distinct areas; technology, HR/staffing and finance. These challenges differ from smaller companies because such companies do not deal as strongly with the need for growth.
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